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Emerging Asia and global inflation

Chris Hunt

The integration of emerging markets such as China into the global economy has had a profound effect on the inflation process in advanced economies. This article examines the relationship between the integration of emerging Asia into the global economy and the inflation process in New Zealand, highlighting both the downward and upward pressures on inflation emanating from the region. Monetary policymakers appear to have benefited from the protracted deflationary impulse from lower import prices, which may have made the achievement of domestic inflation objectives easier to achieve than might otherwise have been the case. However, this positive supply shock has more recently been matched by the headwinds of higher commodity prices.